F&C suffers £4bn outflow as insurers pull assets

F&C Asset Management suffered a net outflow of £4 billion in the final three months of the year after it lost a number of strategic partners.

The mandates lost during the quarter included insurance funds and a £1.3 billion gross loss from the BCP Pension Scheme as a result of a decision by the Portuguese government to nationalise the past pension obligations of the nation's largest banks.

The Portuguese government withdrew a further £1 billion of assets in January 2012 but F&C said it was currently not aware of any further withdrawals forthcoming from this nationalisation policy.

Insurance and strategic partner net outflows also included £1.4 billion withdrawn from a derivatives pool which was not covered under an exclusivity agreement and for which fees were earned on a transactional, rather than management fee, basis.

To compound matters F&C has been given 12-months notice by Friends Life of its intention to withdraw £2.3 billion of assets, principally in its annuity fund, after the latter announced its intention to launch an in-house asset management subsidiary in the second half of 2012.

F&C said the yield on assets withdrawn of approximately six basis points was substantially lower than the group's average fee margin and the resulting revenue impact of approximately £2.5 million represents less than 1% of F&C's total revenues, while the Friends Life assets represent approximately £1.1 million of annual revenues.

Meanwhile F&C's retail business was hit by the market volatility and subdued investor sentiment. Open-ended funds saw outflows of £200 million in the quarter although F&C drew some comfort from support for its Thames River multi-manager range from advisers.  

These outflows, combined with a weakening of the euro versus sterling offset positive asset performance in the fourth quarter F&C said, resulting in a decline in assets under management from £103.2 billion in September to £100.1 billion at the end of the year.

F&C chairman Edward Bramson said: 'We have made good progress on the strategy we set out in October, showing a modest net inflow, primarily in fixed income mandates, into our third-party institutional business and having a further £1.2 billion of won but unfunded mandates in the pipeline.'

'While asset performance during the fourth quarter was positive, a decline in the sterling/euro exchange rate magnified the reduction in strategic partner assets under management. However, the yield on the strategic partner assets which were withdrawn was significantly lower than our average rate at approximately six basis points.

'The cost reduction programme we set out in our strategic review remains on schedule. We are continuing to work on initiatives to deploy the resources this programme will release into areas of growth for F&C and to the overall improvement of shareholder value.'